Ghost Cards for Claims Payment? Should Healthcare Providers Be Scared?

By Renae D Price, CMPE, CHFP, CPA

All healthcare industry stakeholders and others have heard about electronic claim payments and Medicare has been paying hospitals electronically since 1993. A new payment mechanism is being adopted by claims payers that will be seen by most, if not all, providers across the United States in 2014. Health plans and third party administrators are implementing “ghost card” or “virtual card” card payments for claim payments. In contrast to receipt of a check or a direct deposit, providers may receive a paper document or a fax that contains a WebEx link to access for release of fund. Providers are instructed by the document to go to the web and process a one-time payment that will pay the claim through the merchant card network. Providers who “accept” this form of payment will receive their funds along with other funds for credit card payments from consumers.

Should providers readily accept virtual card payments?

Providers are sometimes told that they MUST accept such card payments based on their contract with the merchant card provider, which requires acceptance of all presented cards. That agreement requirement is about presentment of physical cards and does not include these virtual cards….But how many collectors know the details of their merchant card contract? Many simply process the payment to help meet monthly collection goals.

Generally speaking, the typical merchant card vendor used by a provider imposes an “interchange rate” or a discount fee applied to such a payment at a rate of 3.0 % or more of the claims payment amount. That means a provider only receives 97 cents for every dollar paid by the health plan in this process. How many provider organizations can afford to give up 3% of their revenues? The attraction of this “ghost card” process to claims payers is it changes the transactional claims-payment expense into a revenue center instead of an expense center. The merchant card network is able to pay a rebate back to the claims payers that may be as high as 1.5% of claims paid in this fashion. Health Plans and self-insured claims payers are not the only users of this process as the VA system has adopted it as well. Many hospitals use this type payment processing to pay supplies and other vendors but this use for claims payments is relatively new.

After January 1, 2014, any ambiguity about how providers are to be paid goes away. The Affordable Care Act (Obama Care) made electronic claim payments through electronic funds transfer a required HIPAA standard. Under the ACA “Operating Rules” that standard is promulgated and clearly defined as an electronic claim payment as an ACH (Automated Clearing House) transaction, not a card transaction. If readers are not familiar with ACH payments, think about your direct deposit of payroll or monthly social security payments. The adopted ACH format is known as a CCD plus addenda or CCD+ format.

The cost to the providers to accept ghost card payments varies greatly between card and ACH payment methods. For an example, consider the impact of processing a $2,500 claim payment. A $2,500 claim payment paid via an ACH would result in bank charges at or around 34 cents. The same transaction paid via a ghost card would result in an interchange fee (cost to provider) of $47.60. Providers in some states have seen requests to pay six figure claims in this manner and if accepted pay thousands of dollars to process one claim payment. Every market indication is that more payers will be attempting to pay via cards in 2014 due to the attraction of a rebate to them.

What should providers do?

It is important for senior financial management staff to set policy with regard to health plan card payments for claims payment. Some providers may opt to accept virtual card payments as a matter of routine, yet staff should be provided specific guidelines and possibly claims payment amount limits. If an organization opts to never process virtual card payments, revenue cycle staff and management should ensure adherence to the “no ghost cards” processing policy. A strict no-acceptance and no-exception policy by a Providers is possible beginning January 1, 2014 based on Obama Care provisions that supersede prior ambiguous legalities cited by health plans requiring Providers to accept virtual card payments. They now have no legal leg to stand on as The Operating Rules clearly state that HIPAA covered plans MUST comply and provide an ACH electronic funds transfer. During initial implementation, healthcare financial professionals may have to quote chapter and verse of the operating rules. They may also have to go so far as to use the new CMS anonymous complaint mechanism to ensure HIPAA compliant claims payments.

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